Green Book August 2013
We Get Bulled Over As The Major Trend Moves Back To Positive
A top-down and bottom-up look at the Emerging Markets, plus two thematic group ideas. The S&P 500’s 19% surge should ensure a stronger second half economy. IF 2011’s decline was a bear market, the new bull is only 22 months old. We handicap the high in Housing; is there a new leg in the Commodity decline; is Tech’s tide rising? Two histograms make the case that stocks are cheap. We like Electronic Manufacturing Services and Health Care Distributors. A look at the euro and the yen reveals a regime shift in both cases, but for different reasons. We expect higher volatility on the 10-year yield to persist.
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Featured Articles
Bulled Over
The Major Trend Index has experienced a bout of instability since April, twice retreating to its Neutral zone before the bull market promptly overrode both signals.
A Comprehensive Look At The Emerging Markets: Diagnosis And Prognosis
We examine Emerging Markets from both the top-down and bottom-up perspectives as we try to identify where to move and what to expect. We check in on two successful EM thematic group ideas as well.
The Economy And Earnings
The YTD surge of 19% in the S&P 500 should ensure a stronger second half economy, and the big five-point jump in the latest Purchasing Managers Survey (ISM) might be the first evidence of this.
Two Bulls For The Price Of One?
IF one considers the 2011 decline a full-fledged bear market, then it follows the new bull market is only 22 months old. After all, we’re seeing some “immature” market behavior, and some atypical bear warnings.
Two Valuation Metrics Still Bucking The Norm
With many (but not all) of our valuation metrics in overvalued territory, we present two histograms from our forthcoming quarterly BenchMarks publication that make the case that stocks are cheap (well, almost).
Electronic Manufacturing Services Purchased In Select Industries
Attractive valuations, improving growth and technical strength are the key drivers. The group offers an opportunity to participate primarily in the overall growth of computing devices.
Health Care Distributors Purchased In Select Industries
Excellent scores in three of six model categories, plus it offers plenty of market cap and low beta relative to other Health Care groups. We think it will benefit from broad, long-term industry trends.
10-Year: Taper the Taper—Upside Limited
If interest rates keep going higher from here, we would run the risk of derailing a still-fragile recovery. As long as the Fed tapering uncertainty exists, we expect higher volatility on the 10-year yield to persist in the mean time.
The Dollar: Upside Limited In The Near Term
A closer look at the dollar’s two main counterparts, the euro and the yen, reveals a regime shift in both cases, but for different reasons.
Sector Performance and Beta Comparisons
There are some substantial deviations in sector performance depending on your constituents and weighting scheme while, simultaneously, betas are converging toward one another.
Checking In On Some Past Group Ideas
Updates for three groups we highlighted recently, including two domestic (Education Services and Automotive Retail), and one foreign-based thematic group, the Asia Healthy Tigers Index.
Table of Contents
Stock Market
- The Economy And Earnings
- Bulled Over
- Two Bulls For The Price Of One?
- “Immature” Market Behavior
- Not Your Typical Bear Warnings...
- Handicapping The High In Housing
- A New Leg In The Commodity Decline?
- A Turn In Tech’s Tide?
- Two Valuation Metrics Still Bucking The Norm
Of Special Interest
Macro Monitor
- 10-Year: Taper the Taper—Upside Limited
- The Dollar: Upside Limited In The Near Term
- RAI Fell, But Stayed On “Higher Risk” Signal—Remain Cautious
- U.S. Investment Grade Corporate Bonds: Maintain Favorable
- U.S. High Yield Corporate Bonds: Maintain Neutral
- U.S. Municipal Bonds: Maintain Neutral
Equity Strategies
- Select Industries: Health Care And Info Tech Exposure Added
- Group Models Agree On Energy & Materials
- Electronic Manufacturing Services Purchased In Select Industries
- Health Care Distributors Purchased In Select Industries
- The Short Side—Still Ahead YTD
- Select Attractive Domestic Groups
- Checking In On Some Past Group Ideas
Quant
Market Internals
- Up/Down Earnings: Q2 Reports Start Below Average But Ahead Of Q1
- Q2 Median Revenue Comparisons: Higher Growth In Large And Mid Caps
- Q2 Median Company Earnings: Growth Rates Volatile But Positive In General
- Key Observations On Q2 S&P 1500 Earnings
- Small Cap Premium Remains 15%
- Small Caps Lead Year-To-Date
- Growth Leads In Mid And Small Caps But Lags In Large Caps
- S&P 500: Equal Weighted Outperforms During July
- Dissecting The Capital Tier Indices
Portfolios
Major Trend
Estimating the Downside
At Random
Bulled Over
The Major Trend Index has experienced a bout of instability since April, twice retreating to its Neutral zone before the bull market promptly overrode both signals.
A Comprehensive Look At The Emerging Markets: Diagnosis And Prognosis
We examine Emerging Markets from both the top-down and bottom-up perspectives as we try to identify where to move and what to expect. We check in on two successful EM thematic group ideas as well.
The Economy And Earnings
The YTD surge of 19% in the S&P 500 should ensure a stronger second half economy, and the big five-point jump in the latest Purchasing Managers Survey (ISM) might be the first evidence of this.
Two Bulls For The Price Of One?
IF one considers the 2011 decline a full-fledged bear market, then it follows the new bull market is only 22 months old. After all, we’re seeing some “immature” market behavior, and some atypical bear warnings.
Two Valuation Metrics Still Bucking The Norm
With many (but not all) of our valuation metrics in overvalued territory, we present two histograms from our forthcoming quarterly BenchMarks publication that make the case that stocks are cheap (well, almost).
Electronic Manufacturing Services Purchased In Select Industries
Attractive valuations, improving growth and technical strength are the key drivers. The group offers an opportunity to participate primarily in the overall growth of computing devices.
Health Care Distributors Purchased In Select Industries
Excellent scores in three of six model categories, plus it offers plenty of market cap and low beta relative to other Health Care groups. We think it will benefit from broad, long-term industry trends.
10-Year: Taper the Taper—Upside Limited
If interest rates keep going higher from here, we would run the risk of derailing a still-fragile recovery. As long as the Fed tapering uncertainty exists, we expect higher volatility on the 10-year yield to persist in the mean time.
The Dollar: Upside Limited In The Near Term
A closer look at the dollar’s two main counterparts, the euro and the yen, reveals a regime shift in both cases, but for different reasons.
Sector Performance and Beta Comparisons
There are some substantial deviations in sector performance depending on your constituents and weighting scheme while, simultaneously, betas are converging toward one another.
Checking In On Some Past Group Ideas
Updates for three groups we highlighted recently, including two domestic (Education Services and Automotive Retail), and one foreign-based thematic group, the Asia Healthy Tigers Index.
Stock Market
- The Economy And Earnings
- Bulled Over
- Two Bulls For The Price Of One?
- “Immature” Market Behavior
- Not Your Typical Bear Warnings...
- Handicapping The High In Housing
- A New Leg In The Commodity Decline?
- A Turn In Tech’s Tide?
- Two Valuation Metrics Still Bucking The Norm
Of Special Interest
Macro Monitor
- 10-Year: Taper the Taper—Upside Limited
- The Dollar: Upside Limited In The Near Term
- RAI Fell, But Stayed On “Higher Risk” Signal—Remain Cautious
- U.S. Investment Grade Corporate Bonds: Maintain Favorable
- U.S. High Yield Corporate Bonds: Maintain Neutral
- U.S. Municipal Bonds: Maintain Neutral
Equity Strategies
- Select Industries: Health Care And Info Tech Exposure Added
- Group Models Agree On Energy & Materials
- Electronic Manufacturing Services Purchased In Select Industries
- Health Care Distributors Purchased In Select Industries
- The Short Side—Still Ahead YTD
- Select Attractive Domestic Groups
- Checking In On Some Past Group Ideas
Quant
Market Internals
- Up/Down Earnings: Q2 Reports Start Below Average But Ahead Of Q1
- Q2 Median Revenue Comparisons: Higher Growth In Large And Mid Caps
- Q2 Median Company Earnings: Growth Rates Volatile But Positive In General
- Key Observations On Q2 S&P 1500 Earnings
- Small Cap Premium Remains 15%
- Small Caps Lead Year-To-Date
- Growth Leads In Mid And Small Caps But Lags In Large Caps
- S&P 500: Equal Weighted Outperforms During July
- Dissecting The Capital Tier Indices
Portfolios
Major Trend
Estimating the Downside
At Random
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